ajinomoto principle on corporate governance...ajinomoto do not imply a reduction in transactions and...
TRANSCRIPT
1
Ajinomoto Principle
on Corporate Governance
~Aiming for Sustainable Growth through Value Creation via ASV~
Ajinomoto Co., Inc.
June 28, 2019
2
Table of Contents
Chapter 1: Introduction
Chapter 2: Basic Approach
Chapter 3: Relationship with Shareholders and
Stakeholders 1. General Meeting of Shareholders
(1) Positioning of the General Meeting of
Shareholders
(2) Ajinomoto’s Initiatives
2. Dialogue with Shareholders and Investors
3. Capital Policy and Shareholder Return Policy
4. Cross-Shareholdings
(1) Holding Policy and Reviews
(2) Exercise of Voting Rights
(3) Cross-Holding Shareholders
5. Application of IFRS
6. Related Party Transactions
7. Disclosure of Information
(1) Disclosure of Financial Information
(2) Timely and Fair Disclosure
(3) Disclosure Method
Chapter 4: Board of Directors and Committees,
etc. 1. Board of Directors
(1) Role of the Board of Directors
(2) Composition and Diversity of the Board of
Directors
2. Nominating Advisory Committee
3. Compensation Advisory Committee
4. Corporate Governance Committee
5. Management Foundation Review Committee
6. Outside Director Communication Committee
7. Support System for Board of Directors and
Committees, etc.
8. Evaluation of Effectiveness of the Board of
Directors
Chapter 5: Directors 1. Selection and Dismissal of Directors
(1) Procedures for the Selection of Directors
(2) Capability Requirements for Director
Candidates, etc.
(3) Reelection and Dismissal of Directors
(4) Successor Plans
2. Compensation
(1) Basic Policy Regarding Director
Compensation
(2) Details of Director Compensation
(3) Policy Regarding the Determination of
Payment Ratio, etc., for Company
Performance-Linked Compensation and
Non-Company Performance-Linked
Compensation
(4) Procedures for Determination of Director
Compensation
3. Training
4. Independence Standards
Chapter 6: Audit & Supervisory Board
Members, Audit & Supervisory
Board, and Accounting Auditor 1. Audit & Supervisory Board Members and Audit
& Supervisory Board
(1) Role of the Audit & Supervisory Board
Members and Audit & Supervisory Board
(2) Composition of the Audit & Supervisory
Board Members and Audit & Supervisory
Board
(3) Procedures for the Selection of Audit &
Supervisory Board Members
(4) Audit & Supervisory Board Members’ Audit
(5) Operation of the Audit & Supervisory Board
(6) Audit & Supervisory Board Member Staff
2. Accounting Auditor
Chapter 7: Risk Management 1. Basic Approach
2. Internal Controls
3. Committees under the Executive Committee
Chapter 8: Compliance 1. Basic Approach
2. Internal Reporting System
Chapter 9: Diversity Promotion
※ The (CGC Rules X-Y) description of each item in this Principle indicates its correspondence with the Corporate
Governance Code laid out by the Tokyo Stock Exchange (June 2018 Edition).
3
Chapter 1: Introduction
The Ajinomoto Group has passed down the commitment of its founding to improve people’s nutrition through
umami seasonings that make simple foods taste better. We have achieved growth consistently since our founding
through initiatives that create both social and economic value through our businesses. We call these initiatives
Ajinomoto Group Shared Values (ASV), and going forward we will continue to strengthen corporate governance
in order to achieve sustainable growth through unique value creation through these ASV initiatives. This
Principle, which is the foundation of ASV's evolution, is intended to make it easy for stakeholders to understand
the ongoing efforts to strengthen the Ajinomoto Group's corporate governance, central to deepening dialogue
and collaboration, and published based on Board of Director's discussions.
Chapter 2: Basic Approach (CGC Rules 2-1, 2-2, 2-3 and 3-1)
The Ajinomoto Group positions corporate governance as one of the most important aspects of its management
foundation for accelerating its ASV efforts and achieving its vision of becoming a “Genuine Global Specialty
Company”. While continuously working to establish an effective corporate governance system that balances
“supervising appropriate execution to reflect stakeholders' opinions” and “flexible decision making and
execution,” the Ajinomoto Group sincerely maintains the “Ajinomoto Group Policy” (hereinafter referred to as
“AGP”), which shows the behavior and way of thinking that Ajinomoto Group companies, their officers, and
their employees should follow. The Ajinomoto Group believes that continuation to work on the establishment
of internal control systems and their appropriate operation and to deepen dialogue and collaboration with
stakeholders will lead to solve “issues that the society of 21st-century are facing” through our business, as well
as to become the foundation of ASV which continuously enhance corporate value.
Chapter 3: Relationship with Shareholders and Stakeholders
1. General Meeting of Shareholders (CGC Rules 1-1 and 1-2)
(1) Positioning of the General Meeting of Shareholders
The General Meeting of Shareholders, as the highest decision making body of Ajinomoto Co., Inc.
(hereinafter referred to as “Ajinomoto”), is responsible for decision making with matters that materially
affect the interests of shareholders, such as the distribution of surplus as stipulated by laws and in the
Articles of Association, the selection and dismissal of Directors and Audit & Supervisory Board members,
and the changes in the Articles of Incorporation and reorganizations, etc. Ajinomoto has positioned the
General Meeting of Shareholders as an opportunity for Directors to constructively interact with
shareholders and strives to ensure sufficient time for necessary dialogue while giving easy-to-understand
explanations to shareholders.
(2) Ajinomoto’s Initiatives
At the General Meeting of Shareholders, Ajinomoto makes the following efforts so that shareholders can
appropriately exercise their voting rights and other rights.
4
1) The date of the General Meeting of Shareholders is decided with consideration to avoid dates when
many other companies hold their General Meeting of Shareholders, ensuring the necessary time for
closing operations and for auditing, and securing a venue where a large number of shareholders can
attend.
2) The Convocation Notice of the Ordinary General Meeting of Shareholders is dispatched three weeks
prior to the date of the Meeting and is disclosed on Ajinomoto's website prior to dispatch.
3) An opportunity to exercise voting rights via the Internet is provided to shareholders so as to improve
the environment for shareholders to exercise their voting rights.
4) Ajinomoto participates in the electronic voting platform to improve the environment for institutional
investors to exercise their voting rights.
5) An English summary of the Convocation Notice of the Ordinary General Meeting of Shareholders is
available on Ajinomoto's website.
2. Dialogue with Shareholders and Investors (CGC Rules 5-1)
Ajinomoto developed the following procedures in order to promote constructive dialogue with shareholders
and investors.
1) The executive officer in charge of IR has responsibility for overall dialogue with shareholders, assisted
by the general managers of the Corporate Planning Dept., Public Communications Dept., Legal Dept.,
and Finance & Accounting Dept., as well as the head of the IR Group in the Global Finance Dept.
2) Persons in charge of Corporate Planning Dept., Public Communications Dept., and IR hold an
information liaison meeting monthly for sharing future plans and the status of preparations of
presentations, so that to ensure that matters requiring public disclosure are announced appropriately
without delay. .
3) As well as holding financial results briefings, medium-term management plan briefings, business
briefings, ESG briefings, and other briefings, facility tours for individual shareholders and IR seminars
for individual investors are held in order to deepen their understanding of the Ajinomoto Group.
4) The IR Group of the Global Finance Dept. holds dialogues not only with shareholders but also with
institutional investors. The opinions and concerns of shareholders and institutional investors obtained
throughout the dialogues are shared with top management and with persons in charge of Corporate
Planning Dept. and Public Communications Dept. as monthly report by the IR Group.
5) Training is held for persons in charge of dialogue with shareholders and investors with regard to the
management of insider information. Additionally, in cases where executive officers and employees
are involved with projects that correspond to important undisclosed information, the relevant
executive officers and employees are asked in advance to submit a confidentiality agreement for each
applicable case.
3. Capital Policy and Shareholder Return Policy (CGC Rules 1-3 and 5-2)
The Ajinomoto Group promotes a capital policy that allocates generated cash flow to growth investment
and the expansion of shareholder returns while working to improve ROE and maximize operating cash
flow for sustainable improvement of shareholder value through ASV.
5
In addition, interest-bearing debt is provisioned on the basis of managing the net D/E ratio at an appropriate
level and aiming for an optimal capital/liability structure that takes into account capital efficiency and
capital costs.
4. Cross-Shareholdings (CGC Rules 1-4)
(1) Holding Policy and Reviews
Ajinomoto Co., Inc. decrease its holdings of cross-shareholdings gradually to the minimum amount
necessary. We carefully scrutinize each individual cross-shareholding in terms of whether the purpose of
holding them is appropriate and whether the benefits and risks of holding them are commensurate with the
capital costs. Every year, we review the propriety of holding shares through the Board of Directors and
disclose the results of these reviews. Additionally, those shares judged as inappropriate to hold will be sold
once the detailed plan for selling is determined.
(2) Exercise of Voting Rights
Ajinomoto exercise the voting rights of cross-shareholdings so as to contribute to improving long-term
corporate value. Ajinomoto vote against instances where shareholder value is significantly impaired due to
organizational restructuring or other factors, or cases where serious concerns arise with regard to corporate
governance for reasons like social scandals.
(3) Cross-Holding Shareholders
Ajinomoto do not imply a reduction in transactions and do not prevent sales, etc., if a company holding
Ajinomoto's shares as a cross-shareholding expresses an intention to sell its shares, etc.
5. Application of IFRS
Ajinomoto uses IFRS (International Financial Reporting Standards) as its financial reporting standard but
defines AGAP-I (Ajinomoto Group Accounting Policy with IFRS base) and applies it to the entire
Ajinomoto Group, and at the same time works to improve the efficiency of business operations and
governance by establishing the "Group Shared Policy on Accounting" as the policy regarding accounting.
6. Related Party Transactions (CGC Rules 1-7)
When a Company Director who serves concurrently as the president, etc., of another company or
organization, etc., (excluding wholly-owned subsidiaries) is the counterparty in a transaction with
Ajinomoto and other similar instances, the transaction with regard to competition or conflict of interest
involving the Director shall be approved by the Board of Directors by presenting the details of such
transactions.
Additionally, Ajinomoto carries out transaction with major shareholders in accordance with "Fair and
Transparent Transactions" and the "Group Shared Policy on Procurement" as defined in the AGP.
7. Disclosure of Information (CGC Rules 3-1)
(1) Disclosure of Financial Information
6
Ajinomoto discloses financial information such as financial status and business performance, management
strategies and management issues, and non-financial information such as ESG and risk management
information in accordance with laws and regulations. Furthermore, we proactively provide information so
that all stakeholders, including shareholders and investors can understand the path towards increased
corporate value through ASV with the aim of becoming a “Genuine Global Specialty Company”.
(2) Prompt and Fair Disclosure
Ajinomoto discloses information in a prompt and fair manner, in accordance with the Financial Instruments
and Exchange Law, other laws and regulations, and the rules for timely disclosure stipulated by the
Financial Instruments Exchange which lists our securities. In addition, based on Ajinomoto's timely
disclosure rules, Ajinomoto also deems information that may affect the investment decisions of investors,
even if such information is not applicable to timely disclosure rules, as important company information,
and Ajinomoto will makes efforts to disclose this information in a timely and fair manner.
(3) Disclosure Method
Ajinomoto discloses important Company information in timely disclosure information transmission
systems (TDnet), etc., provided by the Tokyo Stock Exchange, etc., and in press releases, and ensures that
such information is communicated to shareholders and investors via Ajinomoto's website and email
distribution.
Chapter 4: Board of Directors and Committees, etc.
1. Board of Directors
(1) Role of the Board of Directors (CGC Rules 4-1 and 4-5)
Ajinomoto's Board of Directors oversees the business execution of Directors and executive officers, etc.,
and makes important business execution decisions as management's highest decision-making body.
Additionally, through the corporate activities of the Ajinomoto Group centered on ASV, Ajinomoto works
with stakeholders and others to resolve social issues, contributes to the realization of a sustainable society,
and takes responsibility for sustainable enhancement of corporate value.
(2) Composition and Diversity of the Board of Directors (CGC Rules 4-6, 4-7, 4-8 and 4-11)
Ajinomoto has the basic policy for the Board of Directors composed of internal Directors in charge of
business execution, including the CEO, internal Directors who supervise business execution based on their
deep understanding of Ajinomoto's business without being in charge of business execution (hereinafter
referred to as "Non-Executive Internal Director"), and multiple independent outside Directors who can
objectively supervise business execution from an independent standpoint, taking into account the
Competence Requirements, etc. centered on "Ability to achieve ASV," and considers numbers, ratio of
internal and external individuals, ratio of executives and non-executives, and the diversity of individual
experiences, abilities, insights, internationalities, gender, and so on.
In addition, non-executive Directors account for a majority of the Board of Directors and independent
outside Directors account for one-third or more of the Board of Directors so as to promote the separation
7
of supervision and execution, and so as to enhance the effectiveness of supervision by the Board of
Directors.
The Chair of the Board of Directors is the Chairman of the Board of Directors (Torishimariyaku-Kaicho)
who is Non-Executive Internal Director.
2. Nominating Advisory Committee (CGC Rules 4-10)
Ajinomoto established a Nominating Advisory Committee as a voluntary committee of the Board of
Directors so as to fairly and appropriately carry out nominations for Director candidates, select and dismiss
the Chairman of the Board of Directors and the President, and select and dismiss the Representative
Director.
The Committee consists of four to seven members who are appointed from among the Directors by
resolution of the Board of Directors.
The majority of the members of the Committee are outside Directors and the Chair is also selected from
amongst the outside Directors. The Committee Chair promptly reports to the Board of Directors on the
contents and results of the Committee’s deliberations.
3. Compensation Advisory Committee (CGC Rules 4-10)
Ajinomoto established a Compensation Advisory Committee as a voluntary committee of the Board of
Directors so as to fairly and appropriately determine the compensation of Directors, corporate executive
officers, and corporate fellows, etc.
The Committee consists of four to seven members who are appointed from among the Directors by
resolution of the Board of Directors.
The majority of the members of the Committee are outside Directors and the Chair is also selected from
amongst the outside Directors. The Committee Chair promptly reports to the Board of Directors on the
contents and results of the Committee’s deliberations.
4. Corporate Governance Committee
Ajinomoto established a Corporate Governance Committee as a voluntary committee of the Board of
Directors so as to maintain and improve the soundness of management and corporate governance.
The Committee consists of four to seven members who are appointed from among the Directors or Audit
& Supervisory Board members by resolution of the Board of Directors.
The majority of the members of the Committee are outside Directors or Audit & Supervisory Board
members and the Chair is also selected from amongst the outside Directors or Audit & Supervisory Board
members. The Committee Chair promptly reports to the Board of Directors on the contents and results of
the Committee’s deliberations.
5. Management Foundation Review Committee
Ajinomoto established a Management Foundation Review Committee as a subordinate body of the Board
of Directors so as to establish a strategic direction for Group management and strengthen the foundation of
the cross-Group management function.
8
The Committee consists of three Representative Directors, including the President, and one Non-Executive
Internal Director, and the Chair is the President. The Committee Chair reports to the Board of Directors on
the contents of their examination.
6. Outside Director Communication Committee and Lead Independent Outside Director
Ajinomoto established an Outside Director Communication Committee with the aim of improving the
quality of supervision of business execution through the exchange of information between the outside
Directors and the outside Audit & Supervisory Board members and through the mutual complementation
of specializations.
In addition, a lead independent outside Director is mutually selected by the independent outside Directors
so as to respond to stakeholders and provide effective advice to executive Directors.
7. Support System for Board of Directors and Committees, etc. (CGC Rules 4-13)
In order to ensure the efficient and effective management of the Board of Directors and various committees,
the Secretariats consisting of the Corporate Planning Dept., Legal Dept., Secretarial Dept., and Human
Resources Dept., etc., supports surveys, preparation of materials, and schedule coordination. In addition,
the Secretariats cooperate with each other so as to promote timely and appropriate information sharing.
8. Evaluation of Effectiveness of the Board of Directors (CGC Rules 4-11)
Ajinomoto aims for the Board of Directors capable of appropriate and flexible decision making and
supervision of business execution, and analysis and evaluation of the effectiveness of the Board of Directors
based on the results of self-evaluation surveys from all Directors and all Audit & Supervisory Board
members, analysis by external lawyers, and verification of results at the Board of Directors.
In addition, based on the results of the effectiveness evaluations, the Board of Directors discusses,
formulates and implements measures to improve issues that were discovered. Through these efforts,
Ajinomoto strives to improve the effectiveness of the Board of Directors and further strengthen corporate
governance.
Chapter 5: Directors
1. Selection and Dismissal of Directors (CGC Rules 3-1 and 4-3)
(1) Procedures for the Selection of Directors
Ajinomoto's Directors are nominated by the Board of Directors based on the recommendations of the
Nominating Advisory Committee and are selected by a resolution of the General Meeting of Shareholders.
The selection of the Chairman of the Board of Directors, President, and Representative Director is made
by a resolution of the Board of Directors, based on the recommendations of the Nominating Advisory
Committee.
(2) Competence Requirements for Director and Top Management Candidates
For selection of Directors and top management candidates, including Chief Executive Officer, the
following competence requirements, etc., (hereinafter referred to as "Competence Requirements centered
9
on ‘Ability to achieve ASV’") are determined by the Board of Directors, based on discussions of the
Nominating Advisory Committee.
① Ability to achieve ASV
② Ability to achieve global top 10 class company
③ Ability to create markets
④ Ability to achieve sustainable growth
(3) Reelection and Dismissal of Directors
In reelecting Directors, the Nominating Advisory Committee conducts substantial discussions reflecting
performance evaluation, etc., in addition to the Competence Requirements centered on "Ability to achieve
ASV."
In addition, when considering resolutions for dismissal of Directors and the dismissal of top management
positions, the Board of Directors makes a comprehensive decision based on the deliberations of the
Nominating Advisory Committee or an investigation by a Third-Party Committee, etc., if necessary.
(4) Succession Plan (CGC Rules 4-1)
Based on the request from the Board of Director's, the Nominating Advisory Committee reports to the
Board of Directors about candidates for future Chief Executive Officer, develops a successor plan, and
confirms and advises on its operation.
2. Compensation (CGC Rules 3-1 and 4-2)
(1) Basic Policy Regarding Director Compensation
The basic policy on compensation for Ajinomoto's Directors is as follows.
1) It leads to medium and long-term expansion of corporate value in line with AGP
2) The compensation level is sufficiently competitive compared to the market level.3) Decisions are made
through a transparent process and their content can be described to stakeholders
(2) Details of Director Compensation
1) Content of Director compensation, excluding outside Directors
The compensation of Directors, excluding outside Directors, comprises monthly compensation, short-
term company performance-linked compensation, and medium-term company performance-linked
stock compensation, as described below.
(a) Monthly compensation
Monthly compensation is paid in cash as a basic compensation in line with job responsibilities and
to sufficiently demonstrate the qualities and capabilities to drive corporate growth, and the amount
of compensation for each position is set in reference to the results of a survey by an external
organization.
(b) Short-term company performance-linked compensation
Short-term company performance-linked compensation is monetary compensation that is paid
according to company-wide and divisional performance evaluations at the end of the fiscal year as
10
an incentive to encourage steady achievement of single-year performance goals and appropriate
management.
Company-wide performance uses sales amount, business profit, profit attributable to owners of the
parent company and ROE (both on a consolidated basis) as evaluation criteria. Departmental
performance uses the performance of the department, organization, and corporation overseen by that
Director as evaluation criteria.
(c) Medium-term company performance-linked stock compensation
Medium-term company performance-linked stock compensation, with the goals of increasing
corporate value and sustainably improving the Ajinomoto Group's performance across the medium
and long-term, uses business profit and ROA (both on a consolidated basis) in the final fiscal year of
the Medium-Term Management Plan as evaluation criteria.
2) Details of Outside Director Compensation
Compensation for outside Directors is only monthly compensation and the amount of compensation is
decided individually by the Board of Directors based on the recommendations of the Compensation
Advisory Committee.
(3) Policy Regarding the Determination of Payment Ratio, etc., for Company Performance-Linked
Compensation and Non-Company Performance-Linked Compensation
1) Compensation Level Policy
The compensation level and ratio of total compensation amount for Directors, excluding outside
Directors, is based on the 75th percentile (the top 25%) of the compensation level for executives at
major Japanese companies, based on the survey results of external organizations.
2) Payment Ratio for Company Performance-Linked Compensation and Non-Company Performance-
Linked Compensation, etc.
The payment ratio of monthly compensation, short-term company performance-linked compensation,
and medium-term company performance-linked stock compensation is approximately 50:36:14
(annualized) when the performance target standards are achieved, but will change as follows depending
on performance. The higher the position, the greater the amount of compensation depending on
performance.
(a) The payment ratio of short-term company performance-linked compensation as a percentage of the
total compensation amount varies between a minimum of approx. 0% to a maximum of approx. 50%
in fiscal years which do not have medium-term company performance-linked stock compensation.
(b) The payment ratio of short-term company performance-linked compensation and medium-term
company performance-linked stock compensation as a percentage of the total compensation amount
varies between a minimum of approx. 0% to a maximum of approx. 70% in fiscal years which have
medium-term company performance-linked stock compensation.
(4) Procedures for Determination of Director Compensation
Upon receiving the recommendations of the Compensation Advisory Committee on policy, compensation
amount, standards, the enactment or revision of internal compensation rules, and performance evaluations,
11
etc., regarding Director compensation, Ajinomoto's Board of Directors determines the amount of
compensation for each Director.
3. Training (CGC Rules 4-14)
Ajinomoto provides the necessary support for self-improvement by internal Directors. In addition to
inviting outside experts every year to exchange opinions, mandatory executive officer training is held for
all Directors and Corporate Executive Officers, management themes are presented and management
problems are shared, and solutions are addressed.
Each department of Ajinomoto explains the details, etc., of its business and duties and provides an
opportunity to inspect its main business sites so that outside Directors gain a better understanding of the
Ajinomoto Group.
4. Independence Standards (CGC Rules 4-9)
Ajinomoto Co., Inc.’s outside Directors or Audit & Supervisory Board members (external) must not fall
under any of the following categories in order to be considered independent.
1) An individual or executive officer that undertakes major transactions with Ajinomoto Co., Inc.
2) A main business partner of Ajinomoto Co, Inc. or its executive officer
3) A consultant, accounting professional, or legal professional who receives large sums of monetary or
other compensation from Ajinomoto Co., Ltd. in addition to the compensation received as an officer
(if the entity receiving the said compensation is a corporation, association, or other organization, an
individual that belongs to said organization)
4) An individual who corresponded to any of 1) through 3) in the past year
5) A family member within the second degree of an individual who corresponds to any of (a) through (b)
below (excluding non-important individuals)
(a) An individual who corresponds to 1) through 4) above
(b) An executive officer of a subsidiary of Ajinomoto Co., Inc. (including non-executive Directors in
cases where an Audit & Supervisory Board member (external) is designated as an independent
Director)
(c) An individual who corresponded to (b) or was a corporate executive officer of Ajinomoto Co., Inc.
during the past year (including non-executive Directors in cases where an Audit & Supervisory
Board member (external) is designated as an independent Director)
(Notes) 1. “An individual that undertakes major transactions with Ajinomoto Co., Inc.” is defined
as someone who received payments from Ajinomoto Co., Ltd. during the most recent fiscal year
that was either 2% of the individual’s total annual consolidated net sales or 100 million yen,
whichever is higher.
2. “A main business partner of Ajinomoto Co., Inc.” is defined as someone who made payments to
Ajinomoto Co., Ltd. during the most recent fiscal year that was either 2% of the total annual
consolidated net sales of Ajinomoto Co., Inc. or 100 million yen, whichever is higher.
3. “Receives large sums of monetary or other compensation from Ajinomoto Co., Ltd. in addition
to the compensation received as an officer” refers to receiving from Ajinomoto Co., Inc. an
12
amount or other compensation that was either 2% of the individual’s net sales or gross income,
excluding compensation as an officer, or 10 million yen, whichever is higher, during the most
recent fiscal year.
Chapter 6: Audit & Supervisory Board Members, Audit & Supervisory Board, and Accounting Auditor
1. Audit & Supervisory Board Members and Audit & Supervisory Board (CGC Rules 4-4)
(1) Role of the Audit & Supervisory Board Members and Audit & Supervisory Board
Ajinomoto's Audit & Supervisory Board members and Audit & Supervisory Board recognize the trustee
responsibility to the shareholders and conduct business and accounting audits, including audits of Director's
performance of duties from an independent and objective position, for the shared benefit of Ajinomoto and
the shareholders as well.
(2) Composition of the Audit & Supervisory Board Members and Audit & Supervisory Board
In accordance with the Articles of Association, Ajinomoto's number of Audit & Supervisory Board
Members and Audit & Supervisory Boards, including people with considerable financial and accounting
knowledge, do not exceed five.
(3) Procedures for the Selection of Audit & Supervisory Board Members
The selection of the Audit & Supervisory Board member candidates is carried out by the Audit &
Supervisory Board under a basic policy to ensure the sound and sustained growth of the Ajinomoto Group
and to establish a high-quality corporate governance system that can stand up to the trust placed in
Ajinomoto by society. Shareholder meeting proposals for the selection of the Audit & Supervisory Board
members are submitted at the request of the Audit & Supervisory Board.
At least one of the Audit & Supervisory Board member candidates must be an individual with considerable
knowledge of finance and accounting, and three candidates for Audit & Supervisory Board members
(external) are selected, while each must possess advanced expertise in laws or accounting or have advanced
knowledge of corporate management.
(4) Audit & Supervisory Board Members’ Audit
Ajinomoto's Audit & Supervisory Board Members carry out audits of each Company department in order
to fulfill their roles and responsibilities, deepening their awareness of management problems from the
standpoint of general management, communicating regularly with and collecting information from
Directors and senior management, and working closely with the Internal Audit Dept. and accounting auditor.
Additionally, target companies are selected from the Group's domestic and international companies based
on their importance and risk approach. Furthermore, Audit & Supervisory Board members conduct audits
of the management of Group companies through collaboration with the auditors of Group companies and
the Group's Standing Audit & Supervisory Board, composed of standing corporate auditors from domestic
Group companies.
(5) Operation of the Audit & Supervisory Board
13
Ajinomoto's Audit & Supervisory Board, as stipulated in laws, regulations, the Articles of Association, and
the Audit & Supervisory Board regulations, discusses and decides important matters related to audits such
as audit policy, audit plans, division of duties, preparation of the Audit & Supervisory Board's audit reports,
etc., and as necessary receives reports from each Audit & Supervisory Board member, Directors, and
employees. In addition, in order to properly carry out their duties, the Audit & Supervisory Board fosters
communication with Directors and senior management to collect information and to create an environment
for auditing.
(6) Audit & Supervisory Board Member Staff
Ajinomoto's Audit & Supervisory Board established the Audit & Supervisory Office as an organization that
assists the Audit & Supervisory Board members in their duties and assigns full-time staff with appropriate
knowledge and skills to enhance their effectiveness. With regards to personnel evaluations, transfers, and
disciplinary actions, etc., for the staff concerned, the consent of the Audit & Supervisory Board members
is obtained, independence from the Directors is heightened, and the effectiveness of the Audit &
Supervisory Board members' instructions is ensured.
2. Accounting Auditor (CGC Rules 3-2)
Ajinomoto's Audit & Supervisory Board appropriately evaluates the accounting auditor by using the
independence and expertise of the accounting auditor and the appropriateness and relevance of the
accounting auditor's audit activity as evaluation criteria and based on reports from management and
executive departments, communication with the accounting auditor and listening to audit plans and audit
result reports and appropriately selects accounting auditor candidates.
The audit work by the accounting auditor is carried out by an executive employee who is a certified public
accountant and other assistants.
Ajinomoto recognizes that the accounting auditor has an important role in ensuring the credibility and
transparency of Ajinomoto's management for shareholders by conducting audits of financial statements,
etc., and works together with the accounting auditor to ensure proper audits.
Chapter 7: Risk Management (CGC Rules 4-3)
1. Basic Approach
Ajinomoto defines risk management as selecting and extracting "Corporate management-level risks and
opportunities," evaluating the degree of impact, and responding. The Committees described in section 3
are established under the Executive Committee and works on strengthening internal controls and risk
management.
"Corporate management-level risks and opportunities" are factors that may affect the Ajinomoto Group's
business activities, business strategies, products, assets, and credit, including those judged to have a
significant impact on the Ajinomoto Group even if it relates to individuals such as executives and
employees, that may seriously damage the lives and bodies of executives and employees, or that may have
an impact on corporate value of the Ajinomoto Group. Among those factors that have not yet emerged, but
14
which management should take the initiative to address, are climate change, social issues, and technological
innovation.
2. Internal Controls
Ajinomoto regards internal controls as an important task of corporate management, the Board of Directors
passed the "Ajinomoto Principle on Internal Control Systems," and Ajinomoto is striving to develop and
enhance internal control systems. The operational status of internal control systems and their effectiveness
are verified each year by the Internal Controls Effectiveness Verification Committee and the results of the
verification are reported to the Board of Directors.
3. Committees under the Executive Committee
Ajinomoto establishes the following Committees under the Executive Committee.
1) Business Conduct Committee
The Business Conduct Committee works to make the AGP known to all and checks to make sure that
management and corporate activities are carried out in compliance with these principles. It also carries
out measures that address issues. In addition, it also organizes manuals, has business management
organizations draft business continuity plans, and determines and inspects their state of readiness via
crisis management drills and the like in order to handle risks outside those at the corporate management-
level and actualized crises.
2) Management Risk Committee
The Management Risk Committee selects and extracts corporate management-level risks and
opportunities from among the various risks and opportunities facing the Ajinomoto Group as our global
expansion accelerates and formulates response measures for them.
3) Investment, Loan, and Business Scrutiny Committee
The Investment, Loan, and Business Scrutiny Committee carries out multifaceted reviews of investment
and loan decisions, revitalization of unprofitable businesses, and exits from unprofitable businesses,
prior to deliberations by the Executive Committee.
4) M&A Committee
The M&A Committee carries out multifaceted reviews of M&A deals prior to deliberations by the
Executive Committee.
Chapter 8: Compliance (CGC Rules 4-3)
1. Basic Approach
The Ajinomoto Group believes that compliance is complying with laws and AGP, as well as meeting the
social demands behind laws and AGP, and the Business Conduct Committee was established to foster an
open corporate culture and raise compliance awareness. The Committee, each time it holds its quarterly
Committee meeting, reports the contents of its deliberations and the status of its activities to the Executive
Committee.
2. Whistle-blowing System (CGC Rules 2-5)
15
The Ajinomoto Group stipulates the "Group Shared Policy on Whistle-blowing" for the purpose of ensuring
compliance management, maintains a system for internal reporting in order to prevent misconduct before
it happens and facilitate early detection and correction, and established an internal/external hotline as an
internal reporting desk. The manager of the General Affairs & Risk Management Dept. instructs relevant
parties to investigate the facts of internal reports and consultations that are received, formulates
countermeasures such as corrective steps, carries out these measures after deliberation with the Business
Conduct Committee as necessary, and reports the results to the Business Conduct Committee.
Chapter 9: Diversity Promotion (CGC Rules 2-4)
The Ajinomoto Group strives to improve diversity by respecting the diversity of attributes and values of
human resources so that every person working in the world can grow and be active regardless of race,
nationality, gender, culture, or customs, etc. The Group appoints a Director in charge of diversity and human
resources. Additionally, as part of diversity promotion, the Group carries out awareness training to create a
more comfortable working environment.
End of Document.